Sorry, you have not enabled Javascript for your internet browser, so some of our website's pages may not render as fully as intended.Please Click here for easy instructions on how to enable Javascript on your browser or consult your IT support staff for help.

Wars of the walled gardens

Ahead of the EU’s General Data Protection Regulation’s coming into effect last week, website operators across the world scrambled to bring their privacy policies in line with the new requirements. According to 21 Century Business Herald, Tencent was the quickest in China to react to the new rules.

On May 18, a little ahead of time, Tencent issued a new set of regulations that it said would help protect the privacy of its users. The rules primarily focused on ways in which users could share audiovisual content on their personal “Moments” newsfeed. However, they were soon panned as Tencent’s “most oppressive” restrictions on content sharing yet.

The new rules consisted of five clauses but it was the second one that caused public outcry. This clause stipulated that users could not share links to audiovisual content hosted on external sites if that third party had not obtained “relevant government certificates”. According to a document widely-shared after the rules were implemented, the second clause prevented users from linking to 30 different third-party platforms.

Zhang Jun, head of Tencent’s public relations department, dismissed this list of “banned” platforms as inaccurate, claiming that many of those listed did in fact have the relevant certificates. However, Zhang then announced that after listening to the feedback of various developers, the clause was being scrapped. On May 21, Tencent repealed it, leaving observers wondering what the real motivation behind the tech giant’s change of heart had been.

Zhang said that the purpose of the new rules, including the second clause, was to improve user experience on WeChat Moments and to enhance content quality. However, many pundits believed Tencent was simply trying to defend itself from competition in the booming short-video market.

Short-videos, like the kind you would see on Vine or Musical.ly, cashed in Rmb5.3 billion ($901 million) of revenues in China last year and Tencent largely missed out. Tencent launched its own short-video app, called Weishi, in 2013 but closed the unit down in mid-2017 after it failed to gain traction (it has since relaunched it, more on which later).

Tencent also holds a stake in Kuaishou, which is one of the industry leaders. However it has been losing ground to Douyin, which was launched in 2016 (see WiC405). Known as TikTok in the international market, the app was developed by Bytedance and was the Apple App Store’s most downloaded non-gaming app during the first quarter of the year. According to the South China Morning Post, Douyin now has over 1 billion monthly active users.

Bytedance CEO Zhang Yiming hailed news of the app’s popularity by taking a jab at Tencent. In a public statement, he claimed that Douyin had achieved a great milestone, despite Tencent’s attempt to plagiarise its design and prevent its success (see WiC409).

Since Douyin’s launch, Tencent has resurrected its Weishi unit with updated features that resemble those available on Douyin, hence the accusation of plagiarism. Douyin also alleges that Tencent had prevented a number of its promotional videos from being shared and viewed on WeChat.

Douyin was included on the list of 30 platforms that WeChat users couldn’t link to. TechNode reported that even after Tencent removed the most restrictive “second clause” in its policy update, content from Douyin could still not be shared directly on WeChat, even though links from other platforms on the list of 30 worked.

In a subsequent statement, Douyin accused Tencent of attempting to build a monopoly, writing, “We have a lot of respect for Tencent but we’re deeply concerned by its recent actions, which we believe are an attempt to use its dominant market position to eliminate competition.” (Tencent’s WeChat social media platform has around 1 billion users in China, who spend hours on it daily.)

The statement continued that as Douyin had been unable to “reach a constructive resolution with Tencent” it would now be taking legal action. In fact, according to the Financial Times, Douyin is already suing Tencent for defamation after a blog post shared on WeChat suggested that Douyin was encouraging child abuse. It is seeking Rmb1 million ($155,868) and an apology for harm to its reputation.

Reputational damage may be why Tencent decided to repeal its second clause too. According to an op-ed on Sohu, the general public is growing frustrated at Tencent’s “selfish” regulations and is more inclined to support the underdog. In this case that’s currently Douyin.

The Week in China website and the weekly magazine publications are owned
and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is
involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these
publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will
therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.